CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
2.2 Procedure and Sanctions in the Event of Non-Compliance Local Operating Business To the extent a Local Company is unable to pro - cure the required 60% local participation to con - duct local business, the Local Company will first need to apply to the Board for an LCCA licence to carry on business in the Cayman Islands. The Local Company would have to submit an appli - cation to the Board, together with supporting due diligence documents and evidence that the Local Company did try to procure local partici - pation. Copies of published advertisements in the Cayman Islands newspapers would suffice for evidence that the Local Company did seek local participation. The Local Company would also have to disclose to the Board any respons - es received from Caymanians. For the purpose of considering that application to grant an LCCA licence, the Board would also have to consider, among other things, the existing local business in the Cayman Islands and the benefit to the Cayman Islands and Caymanians. The applica - tion process generally takes approximately three to six months. An LCCA licence may be issued for up to 12 years and may be subject to such terms and conditions that the Board may see fit to specify in the licence. A Local Company that has an LCCA licence must file a return of the shareholdings of such Local Company as at 31 December with the Board in January annu - ally, for so long as the licence is valid. Once the LCCA licence has expired it cannot be renewed. Any Local Company with less than 60% local participation that does not hold an LCCA licence and is not otherwise exempted or licensed to operate in the Cayman Islands under another law, commits an offence and is liable (i) on sum - mary conviction to a fine of KYD200 (USD243.90) and (ii) on conviction on indictment to a fine of
Company”). This is necessary where it is con - templated that a foreign investor will hold greater than 40% voting or economic interest in a Local Company. The Local Companies (Control) Act (As Revised) of the Cayman Islands (LCCA) has protective provisions therein that provide that a Local Company must have 60% Caymanian shareholders and directors, who maintain 60% of the economic and voting control of the com - pany. An application would have to be made to the Trade and Business Licensing Board (the ”Board”), which has been established pursu - ant to the Trade and Business Licensing Act (As Revised) of the Cayman Islands (TBLA), to obtain a special licence under the LCCA or waiver of the provisions of the LCCA to have greater than 40% foreign ownership and control of the Local Company. Entities registered or incorporated in the Cayman Islands conducting business outside the jurisdiction There is no prohibition on foreign investors investing in Cayman Islands entities that do not fall within the category of a Local Company – ie, entities that are registered or incorporated in the Cayman Islands but are not doing business with businesses and individuals in the Cayman Islands. Certain categories of entities, such as enti - ties registered under the Mutual Funds Act (As Revised) of the Cayman Islands, may require minimum investment thresholds. However, while there may be minimum investment thresholds, there are no restrictions regarding foreign inves - tors making an investment in a Cayman Islands mutual fund. Property in the Cayman Islands There are no restrictions on foreign investors purchasing property in the Cayman Islands.
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